National property prices have fallen for the sixth month in a row as higher interest rates make the cost of borrowing more expensive.
Property data firm CoreLogic said home values across the country fell a further 1.2 per cent in October from a month earlier, with the median home price now at $721,018.
Prices fell in every capital city — and nearly every region as well — as the 2.5-percentage-point increase in rates by the Reserve Bank of Australia since May's record low rate of 0.1 per cent began to bite.
The bank has added a further 0.25 of a percentage point to its cash rate today.
In the capital cities, Brisbane saw the biggest monthly decline in October, of 2 per cent, while the pace of falls continued to ease back in Sydney (-1.3 per cent) and Melbourne (-0.8 per cent) as vendors chose not to sell in a falling market.
In the regions, regional New South Wales (-1.7 per cent) and regional Victoria (-1.4 per cent) fell the most, although prices rose slightly in regional South Australia (+0.1 per cent).
House prices continued to fall at a faster rate than those for apartments.
On an annual basis, national home prices dropped 0.9 per cent in October, but prices in Sydney (-8.6 per cent) and Melbourne (-5.6 per cent) — the cities with the most expensive real estate — fell much more than elsewhere.
CoreLogic's head of Australian research, Eliza Owen, said it was too early to say the worst of the home price falls were over, with rising interest rates and inflation running at annual rate of 7.3 per cent.
"I think it's important to keep in mind that inflation is sticking around, and this has the potential to see further lifts in the cash rate," she said.
"So, there is some risk that this downturn could really accelerate."
CoreLogic said home prices were likely to keep falling until interest rates found a ceiling.
Financial markets are pricing in a cash rate peak of around 4 per cent, while the big banks predict an official cash rate of up to 3.85 per cent.
PropTrack report
On the other hand, a separate survey from REA Group's PropTrack showed that national home prices had stabilised in October.
The PropTrack Home Price Index found home prices fell by just 0.06 per cent, the smallest fall since home prices peaked in March 2022.
In capital cities, over the month, prices fell by 0.1 per cent, while prices rose 0.06 per cent in regional areas.
Reserve Bank modelling shows home prices could fall by 20 per cent, peak to trough, in its worst-case scenario.
Ms Owen said the RBA's central forecast was a fall of 11 per cent in home prices, but some markets could see bigger tumbles.
"I think, when you're talking about a 20-per-cent decline, peak to trough, this is probably more relevant for the expensive and volatile markets," Ms Owen said.
"I think, nationally, that figure seems a bit overblown, but you could certainly be looking at a double digit decline for Sydney and Melbourne."
She said Sydney home prices had already fallen 10 per cent from their peak in January.
Putting the falls into perspective, however, home values across most regions remain well above pre-pandemic levels.
Home prices nationally jumped nearly 29 per cent from the low of the pandemic in September 2020 to record highs in April 2022, thanks to record low interest rates and massive government stimulus.
'Dampener on the market'
Michael Ossitt is a buyer's agent based on Sydney's Northern Beaches.
His patch has experienced some of the largest falls in values since interest rates started going up.
"Through COVID, we saw a huge demand for people [who] wanted to move here."
"But, with the rise in interest rates, and limited borrowing capacity, it certainly put a dampener on the market."
He said the biggest falls were hitting the premium end of the market, but overall prices were down between 10 to 20 per cent.
"We've definitely seen it move towards a buyer's market. Things are staying on the market for longer, and buyers are being able to negotiate on properties," Mr Ossitt said.
"For those people [who] don't have to sell, they're definitely holding on, and just seeing what happens."
Buyers' capacity is 'limited'
In the leafy inner-western suburb of Bardon in Brisbane, competition for a recently renovated 3-bedroom home with a pool was hot.
Bidding started at $1 million before a local on the phone from interstate made the winning offer of $1,370,000.
"We ended up actually going above the sellers' expectations," real estate agent Adam Downes said.
"Generally speaking, market conditions are actually still quite good, contrary to what people are saying."
Mr Downes said buyers were still willing to purchase, despite interest rate rises.
"Everyone is really aware of interest rates rising. I think buyers, their capacity is limited," he said.
"There's not a huge amount of stock available. There's plenty of buyers, so that is obviously still helping the market along."
Rising mortgage rates
The RBA raised interest rates again on Tuesday to 2.85 per cent.
It was the seventh rate rise since May's record low of 0.1 per cent.
CoreLogic said that, if official interest rates rose to 3.1 per cent, that implied an average, variable, owner-occupier mortgage rate of around 5.21 per cent for new borrowers, and 5.69 per cent for existing customers.
In its latest Financial Stability Review, the RBA said that its rapid rate hikes could see some home owners forced to sell their homes because they could not meet their mortgage repayments, with first home buyers and those on fixed-rate mortgages among those at risk.
No forced sales yet
Mr Ossitt said he had not yet seen any forced sales due to interest rate rises in Sydney's Northern Beaches.
"We're in sort of an area where people can manage the increase in interest rates at the moment," he said.
"But we'll have to see how that sort of changes over the next year or so."
However, he said, rates were knocking the borrowing capacity of buyers.
"Every time there's an increase, people are not able to buy what they originally thought they could," he said.
Rental crisis
While some mortgage holders are struggling, so too are renters, with higher rents adding to the cost of living.
Across the country, CoreLogic said, rents rose another 0.6 per cent in October, with apartment rents up 1.1 per cent as people looked for more-affordable options, and house rentals increased by 0.5 per cent.
Melbourne (+13.7 per cent) and Sydney (+13.4 per cent) saw the biggest annual increases in rental prices for units.
A bounce back in migration since Australia's borders reopened and a housing shortage have added to the demand for rental properties.
However, CoreLogic said, the growth in rental prices was starting to slow.
"A gradual slowdown in rental growth in the face of low vacancy rates could be an early sign that renters are reaching an affordability ceiling," CoreLogic said.
"Since the onset of COVID, capital city rents have risen 17.7 per cent and regional rents are up 25.5 per cent."
